‘COLLECTIVE DOMINANCE’: THE NEED TO HASTEN UP INCLUSION IN INDIAN COMPETITION REGIME

The Competition Commission of India (CCI) has been doing a rather phenomenal job as the country’s premier competition law regulator. Its recent orders, like, the one imposing a penalty of 6.3 billion on DLF for abuse of dominance and another imposing a fine of 60 billion on cement companies for engaging in cartelisation etc., illustrate how proactive the CCI has been to ensure fair play in the Indian market.

Unfortunately, in certain cases, the CCI has not been able to take appropriate action against impugned parties because of lacunae in law, for instance, the absence of the concept of ‘collective dominance’ in the Indian Competition Act, 2002. CCI, by its recent order in Sanjeev Rao vs. Andhra Pradesh Hire Purchase Association [Order dated February 07, 2013 in Case no 49/ 2012] admitted its failure to penalise the parties implicated in the case due to the absence of possibility of collective/ joint dominance under § 4 of the Competition Act. This is not the first instance when the CCI has passed such an order. The same has happened on various occasions before, like in Royal Energy Ltd. vs. IOCL [2012CompLR563(CCI)] Shri Sonam Sharma vs. Apple, Vodafone, Airtel & Ors. [2013CompLR0346(CCI)] to name a few. . Such a disturbing trend of cases being dismissed due to absence of the concept of ‘collective dominance’ in Indian law raises a fundamental question: Is the inclusion of ‘collective dominance’ in the Indian Competition regime truly the need of the hour?

Looking at the concept of collective dominance first, it may be noted that it is used when a group of independent or unrelated entities which are connected through an economic link cumulatively hold a ‘dominant position’ in the market and start abusing the same. Developed under the European Competition law, this concept is premised on the fact that the companies need not be dominant individually, but may also be so collectively. This distinguishes collective dominance from other forms of abuse of dominance cases, where a firm has to show dominance independently.

In India, the abuse of dominance is covered under § 4 of the Indian Competition Act, 2002. The Act prohibits an ‘enterprise’ or a ‘group’ to abuse its dominant position. The term ‘group’, added in 2007 through an amendment refers to entities under the same management rather than those independent of each other. Thus,’ collective dominance’ is not covered under the present Indian law. However, the recent Competition (Amendment) Bill, 2012 seeks to acknowledge this concept by adding the words “singly or jointly” after the word ‘group’ in § 4.

The amendment proposing the incorporation of ‘collective dominance’ in India, however, has received mixed response from the academicians as well as legal practitioners. Those advocating the recognition of collective dominance believe that such a step would empower CCI to take stern action in those cases where the unrelated parties implicated are not per se dominant but are so when taken cumulatively. On the other hand, opponents of an express inclusion of ‘collective dominance’ believe that where certain market players come together with an intention to dominate the market, the situation squarely falls within the ambit of ‘anti-competitive’ agreements. Such entities practically constitute a cartel because of the same effect on the market and the customers as alleged in a case of collective dominance. Thus, they argue that ‘collective dominance’ is implicitly covered § 3 (1) and § 3 (2) of the Competition Act. Some also argue that as per §13 of the General Clauses Act, a singular word incorporates its plural within it, and therefore, the words ‘enterprise’ and ‘group’ as mentioned in § 4 of the Indian Competition Act, 2002 mean‘enterprises’ and ‘groups’. Hence, the concept of ‘collective dominance’ already exists in India and incorporating it via an amendment would rather be a redundant exercise.

Further, other opponents argue that the concept of collective dominance, which owes its origin to Europe, cannot be extrapolated to India owing to the developing economy of the country and the nascent regime of competition law.

The author believes that an economy cannot afford a collective abuse of dominance to go unpunished, especially a developing one like ours. Collective abuse of dominance has horrendous repercussions, for example, it puts the consumers at a very low bargaining power where they have no other option but to accept the goods or services on the terms and conditions which such dominant players prescribe, it creates an unconquerable barrier to entry because these close-knit firms ensure that the a new firm never gets the requisite resources to commence its operation, it paralyses the fair competition thereby controlling the market as per its wishes etc. Considering these ill effects which collective dominance has on the consumers as well as the market as a whole, it is very important to confer upon the CCI the power to handle the collective abuse of dominance with an iron fist. Hence, the concept of collective dominance needs urgent recognition under our law, more so in light of the fact that CCI has already dismissed cases where concrete evidence suggesting collective abuse of dominance was present.

Often, such cases are argued on both ‘abuse of dominance’ and ‘cartelisation’, apart from ‘collective dominance’. In such scenarios, the implicated firms escape being penalised for ‘abuse of dominance’ because they are not dominant in the markets individually. Unfortunately, they are also usually successful in escaping penalty for ‘cartelisation’ due to the lack of evidence proving that they actually had a consensus to form a cartel. Collective abuse of dominance, therefore, becomes the last resort to penalise such firms, but CCI has consistently opined that its hands are tied in doing so because such concept does not exist in the Indian law. It is high time we admit that there is a major loophole in the Indian competition regime which has to be set right.

As far as the concern regarding the incorporation of this European concept into Indian competition law is concerned, it is submitted that the Indian Competition Act, 2002 is majorly formulated on the principles of both European and American anti-trust laws. if a strong need is felt for recognising collective dominance, as already argued, there is no reason why we should be apprehensive of the same.

Similarly, the argument that the concept of collective dominance already exists in Indian competition law is a flawed one. It is true that CCI has never explained why collective dominance is not included in § 4, but a plausible explanation stems from a canon of interpretation of statutes that a specific law prevails over a general one. Hence, if the Indian Competition Act, 2002 specifically defines ‘group’ to be one having companies under the same management or control, the CCI cannot be expected to interpret it as unrelated companies going by the General clauses Act. If one reflects on the nuances of this law, he would understand how CCI has acted within its limitations while opining that collective dominance is absent in our competition regime. Thus, addition of collective dominance via an amendment cannot be termed a ‘redundant exercise’.

To conclude, incorporating the concept of ‘collective dominance’ in the Indian competition regime seems to be the only way forward considering CCI’s inability to take stern action against those engaging in the abuse of their collective dominance despite there being ample evidence for the same. Penalising actions of collective dominance is important because otherwise firms would continue their malpractices which would have excruciating effects on the markets and Indian economy as a whole. This is so because it freezes the competition in the market and defeats the very purpose of having a competition law regime in the country. Thus, it is certainly the need of the hour to give much needed teeth to CCI to deal with similar cases arising in future and penalise those who would have otherwise gone scot-free despite collectively abusing their dominance.

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